- Food Imports: Experts Warn of Economic ‘Catastrophe’
Following President Muhammadu Buhari decision to restrict the Central Bank of Nigeria from providing foreign exchange to importers of food items, experts across the country have called on the President to respect the independence of the central bank and warned the Federal Government of the danger of a total ban of food imports in a nation that imports over 90 percent of its consumption.
President Muhammadu Buhari had ordered the Central Bank of Nigeria to stop providing foreign currency for Nigeria’s food import bill to ease pressure on the foreign reserves and speed up diversification process embarked on by the administration.
“President Muhammadu Buhari … disclosed that he has directed the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food into the country,” Tuesday’s statement said.
“Don’t give a cent to anybody to import food into the country,” Buhari said, according to the statement, which said that the call was in line with efforts to bring about a “steady improvement in agricultural production, and attainment of full food security”.
“The foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills.”
Experts, however, warned that lack of central bank’s autonomy could hurt economic growth as vital economic decisions will be made by those that lack economic fundamentals.
“But his comments will continue to drive home the sense that Buhari has no idea how to manage an economy and will raise uncertainty about what other [foreign exchange] restrictions are coming, and contribute to already low business confidence,” said Amaka Anku, Africa director for the Eurasia Group.
She said the central bank “should know that a total ban of food imports is not practical and I doubt that will be the policy.”
Godwin Emefiele, the Governor of the Central Bank of Nigeria, an advocate of local production, had earlier restricted importers of milk from accessing forex from the apex bank and refuted a nationwide criticism that the decision will hurt the industry as Nigeria is only producing 600,000 metric tons per annum while the nation needs 1.3 million MT per year.
On Wednesday, another group of local palm oil producers disagreed with the central bank’s nine percent loan initiative that was introduced under the Anchor Borrowers Scheme for palm oil producers.
According to the National President, National Palm Produce Association of Nigeria, Henry Olatujoye, it would be suicidal to take a nine percent per annum interest loan in an industry where you need a four-year maturity period to grow crops.
“It takes four years for oil palm tree to fruit. It then means that the person will pay N360m on interest alone by the time the fruits come out,” he said.
“If one obtains a minimum loan of N1bn at an interest rate of nine per cent, one would be paying N90m every year.” Suggesting that while the central bank is curbing importation of food items, it is unable to stimulate local production through the right initiatives as sold to the Nigerian masses.
Local investors are wary of high-interest rates in an economy with weak consumer spending, high unemployment, and poor infrastructure.
In fact, continuous restriction without a viable alternative will lead to scarcity and higher consumer prices as more cash will be chasing a few smuggled products.
Bismarck Rewane, an economist and the head of Lagos-based consultancy Financial Derivatives, also pointed to the danger of the new policy.
According to the economist, a curb on foreign exchange for food imports after signing the African Continental Free Trade Agreement (AfCFTA) will create a dumping ground in Nigeria as those scarce goods can now find their way into the Nigerian economy ‘tax-free’.
A study conducted by the Centre for Trade and Development Initiatives, University of Ibadan, noted that with Nigeria’s manufacturing sector still not competitive compared to other top African nations, Nigeria’s imports would rise by 251 percent in the next 15 years after the AfCFTA agreement is implemented in 2020.
This highlighted the significance of healthy local manufacturing while simultaneously pointing to the contradiction between the Federal Government’s goal and the recent economic policies.
Restricting importation of foreign food items after signing the AfCFTA will merely create opportunities for African producers in the absence of competitive local production.
The move “stands in stark contrast to the strategy outlined in the Africa Continental Free Trade Area agreement, and this policy will certainly not set Nigeria’s agricultural sector up to take full advantage of a liberalisation of trade barriers across the continent,” Cobus de Hart, chief economist at NKC African Economics wrote in a research note.
Nigeria’s Exports Under US Duty-free Policy Declines to $300.48m
Nigeria’s Exports to the United States Under Duty-free Policy Declined by 88 Percent to $300.48 million
Nigeria’s total exports under the US duty-free declined by 88 percent from $2,502.86 million to $300.48 million in the first eight months of 2020.
In the latest African Growth and Opportunity Act (AGOA) policy report established in 2000, crude oil export accounted for 99.8 percent of Nigeria’s AGOA exports to the United States in 2019.
In 2019, oil and gas products worth $3.12 billion were exported to the US under the duty-free policy.
However, the plunged in global demand for Nigerian crude oil due to the COVID-19 lockdown weighed on the nation’s oil exports and revenue generation.
The United States imported 5.53 million barrels of crude oil from Nigeria in the first quarter of 2020, down from 15.07 million barrels imported in the final quarter of 2019.
Speaking on the need to improve non-oil export to take advantage of the duty-free like other African nations Mr Olusegun Awolowo, the Executive Director and Chief Executive Officer, Nigerian Export Promotion Council, who spoke at a virtual event recently said despite efforts to sensitise Nigerian exporters on the need to take advantage of the duty-free trade opportunity, only a few Nigerian exporters are benefiting from it.
He said the record crash in global oil prices is an indication that a mono-product economy like Nigeria is not sustainable and that there is an urgent need to develop non-oil export.
“We cannot rely on crude oil export as both our major source of government revenue and foreign exchange generation. We must diversify our export base,” Awolowo said.
Road Projects: Nigeria Owes Contractors More Than N390 Billion, Says Fashola
FG Owes Road Contractors N392 Billion for Road Projects
The Minister of Works and Housing, Babatunde Fashola has said the Federal Government owes companies handling the 711 road projects across the country a total sum of N392 billion.
This, he said was higher than the N276 billion allocated for road projects in the proposed 2021 budget.
The minister disclosed this on Wednesday while defending the 2021 budget of his ministry before the Senate Committee on works.
Fashola said, “With the situation on ground, a stop has come for new projects and the country needs to prioritise the existing ones in order to complete some of them.”
According to him, a total of N6.62 trillion was needed to fund the 711 road projects but because of the limited available resources, there is a need to prioritise the important ones.
He said, “We do not have the resources that we need to fix our road infrastructure at once; the very reason we need to prioritise what want to do.
“The situation on ground requires us to cut our coat according to our cloth and not according to our size because no good will come out of more new road projects now.”
Waltersmith’s 5,000bpd Modular Refinery in Imo State to Commence Operations
5,000bpd Modular Refinery Built in Imo State to Start Operations
The Department of Petroleum Resources (DPR) has said the 5,000 barrels per day Modular Refinery project built in Imo State is ready for operations.
Sarki Auwalu, the Director, DPR, disclosed this during a pre-commissioning visit to the project site in Ibigwe, Imo State.
In a statement released by Waltersmith, Auwalu was quoted as saying the purpose of his visit was to ensure that the refinery was ready to commence operations.
He said “We can confirm that the refinery is very much ready to commence operations. We have seen all the preparations.
“To us, the plant is alive. The commissioning is just symbolic. Everywhere is ready to start off. My overall assessment is excellent.
“We have been to other modular refineries but we have not seen anything like this – the space, the way it is arranged and the way it will work.”
The 5,000 barrels per day modular refinery is scheduled for inauguration this month. The refinery has crude oil storage capacity of 60,000 barrels and it is expected to deliver more than 271 million litres per year of refined petroleum products.
Auwalu said, “The role we play is to enable businesses and create opportunities. When DPR issues you a licence, it enables you to invest and as a result of that opportunity we create, that business is enabled.
“Waltersmith is one of our success stories. We consider the project as ours. We have been tracking their growth and we are happy to see that our child is growing. It is our plan that they expand and they have the potential.”
Speaking on the project, Abdulrasaq Isah, the Chairman, Waltersmith Refining and Petrochemical Company, said the project is the first phase of a series of refinery projects that will lead to the delivery of up to 50,000 barrels per day in refining products.
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